Full coverage auto insurance is an effective way for drivers to replace their vehicles after an accident without having to pay the full cost of a new car.
Based on an analysis of how the cost of insurance and a car’s value change over time, the annual cost of having full coverage auto insurance on a midsize vehicle can approach 50% of the car’s value. car after more than a decade. In addition, the combined cost of car insurance and the deductible you must pay for an at-fault accident is likely to be more expensive than the value of your vehicle if it is more than 10 model years old.
full coverage insurance for vintage cars is often too expensive
A comparison of the cost of insurance and the value of an insured vehicle reveals that comprehensive coverage is a worthwhile investment for cars that are a decade or less old. On average, the cost to insure a 5-year median car with a full coverage policy is $2,010 a year. however, the average value of these cars is $7,501.
More importantly, if your car was totally damaged and you had to make an auto insurance claim, it would still be practical to replace your car after an accident in which you were at fault, one in which you were responsible for the collision and would have to rely on your comprehensive or collision coverage to reimburse you if you were a decade old or older, even considering future cost increases and deductibles.
valuepenguin calculated that the typical cost of insurance for a midsize car increases by 93% after an at-fault accident. Factoring in the cost of the deductible, the annual cost of insuring a 5-year car inflates to $4,389, on average. Although the new insurance rate in this situation would be 59% of the car’s value, drivers would save $3,111 compared to the out-of-pocket cost of replacing the damaged car. This is more than $3,000 or less than more than half of the US. uu. consumers have in their checking and savings accounts, according to the Bureau of Consumer Financial Protection.
After a decade, however, the benefits of having comprehensive coverage for a vehicle diminish. ten-year-old cars are worth an average of $5,067 and cost $1,758 a year to insure before an accident. Insurance premiums are equal to 35% of the value of the car for drivers with a clean record, but increase to 79% after a crash.
In other words, just $1,131, including the deductible, separates a decade’s worth of a car from the cost of insuring it. In our analysis, the difference between the cost of insuring a Honda Civic and its value was $2,405, but Ford, Chevrolet and Toyota models fared worse. for fusion, malibu and corolla, the value of the vehicle was only $706 more than the cost of insurance.
10-15 years after the vehicle’s model year, full coverage is a poor investment. While the cost of full coverage alone may not exceed the value of a car, the cost of insurance is more likely to be higher than the value of the car after an accident. the cost of insuring a car for 15 years after an accident represents 105% of the value of the car, on average.
As a car ages, it becomes increasingly difficult to justify paying for comprehensive coverage. A driver would pay higher premiums for comprehensive coverage only to not be able to use his insurance to fully cover the cost of replacing his car if it totaled. after two decades, the cost of full coverage car insurance would equal 141% of a vehicle’s value. after 25 years, valuepenguin estimates the cost of full coverage insurance to be 188% of the car’s value.
benefits of switching to minimum coverage insurance
It’s financially smart to maintain auto insurance that includes comprehensive and collision coverage on vehicles less than a decade old. the cost of insuring a 5-year car is equal to 27% of the value of the car.
After 10 years, the annual cost of car insurance is 35% of the value of a typical car. While we don’t expect the cost of insuring a car to eclipse the value of the vehicle until it is over 25 years old, the premiums one pays take up a greater proportion of the vehicle’s value as time goes on. For major brands, vehicles that are between 20 and 25 years old could have insurance prices equal to more than three-quarters of the value of your vehicle.
For example, the cost of insurance on a 15-year-old car is 46% of the value of the car, while the driver of a 20-year-old car could pay rates that add up to 60% of the value of their vehicle. . In fact, depending on the make and model of the car, the amount of the insurance premium varies. We found that insuring a 25 year old Ford Fusion could cost 100% of the value of the car before any claims were made on the policy.
As an alternative to buying a new vehicle, drivers (especially those with no history of accidents or citations) may find it a better investment to switch to a minimum coverage policy, one that offers only liability coverage. Under a minimum coverage policy, a driver’s insurance would only pay for the damage they caused to someone else. In exchange for less protection, the rates of a minimum coverage policy are much cheaper than those of full coverage.
car models that have the highest value
Our analysis revealed that the value of the Honda Civic depreciated at a rate of 29% every five years, on average. This was the lowest depreciation rate compared to the Toyota Corolla, Chevrolet Malibu, and Ford Fusion, which would likely lose 34% of their value year over year, on average.
Buying comprehensive coverage for a Civic was also the best investment over a 15-year period. after 15 years and one at-fault claim, the value of a civic was still $947 more than the cost of insurance. all other models at this age would probably be more expensive to insure than they were worth.
In contrast, when comparing auto insurance rates to its competitors, the Honda Civic was most likely to see higher insurance prices. ValuePenguin found that the cost of auto insurance for a Honda Civic would drop by just 11% per five-year lifespan of the car. By comparison, the cost of insuring Toyota, Chevrolet and Ford models decreased 13% over the same period.
frequently asked questions
valuepenguin compiled auto insurance rates for drivers of midsize sedans from the nation’s best-selling brands in california. we got quotes for a honda civic, toyota corolla, ford fusion and chevrolet malibu. We use the Kelley Blue Book fair purchase price to determine the fair value of these vehicles. We checked how the value of these vehicles and the annual cost to insure them changed from 2010 to 2015 to 2020 to find an average rate of deterioration.
With this decay rate in mind, we project the cost of insurance and the value of each vehicle after five, 10, 15, 20, and 25 years to estimate the point at which full coverage becomes too expensive by comparison. with the value of the vehicle before and after an at-fault accident.
valuepenguin’s analysis used insurance rate data from quadrant information services. These rates were obtained publicly from carrier filings and should be used for comparison purposes only, as your own quotes may differ.